Refer to the graph above. If the government wants to collect tax revenues equal to R₂, then the tax rate should be set at: A) T₂ or T₃ B) T₂ only C) T₄ only D) T₂ or T₄

Question

Quizplus · Accepted Answer

To collect R₂ tax revenues, we need to find the tax rate that corresponds to this level of revenue. If we draw a horizontal line at the level of R₂ on the vertical axis and extend it to the point where it intersects the demand curve, we can see that there are two possible tax rates that could generate this revenue: T₂ and T₄. Therefore, the best choice(s) are T₂ or T₄.

Refer to the Graph Above